Sponsor

Sponsor

Obama administration eases pain of Medicare cuts

WASHINGTON (AP) - Millions of seniors in popular private
insurance plans offered through Medicare will be getting a reprieve
from some of the most controversial cuts in President Barack
Obama's health care law.

In a policy shift critics see as political, the Health and Human
Services department has decided to award quality bonuses to
hundreds of Medicare Advantage plans rated merely average.

The $6.7 billion infusion could head off service cuts that would
have been a headache for Obama and Democrats in next year's
elections for the White House and Congress. More than half the
roughly 11 million Medicare Advantage enrollees are in plans rated
average.

In a recent letter to HHS Secretary Kathleen Sebelius, two
prominent GOP lawmakers questioned what they termed the
administration's "newfound support" for Medicare Advantage.

The shift "may represent a thinly veiled use of taxpayer
dollars for political purposes," wrote Sen. Orrin Hatch of Utah
and Rep. Dave Camp of Michigan. Camp chairs the House Ways and
Means Committee, which oversees Medicare. Hatch is his counterpart
as ranking Republican on the Senate Finance Committee.

Seniors are among the deepest skeptics of the new health care
law. A recent AP-GfK poll found that 62 percent disapprove of
Obama's handling of health care, as contrasted with 52 percent
approval among Americans overall. The poll also found that seniors
are more likely to trust Republicans than Democrats on health.

“The net result is that the boat didn't get rocked.”

Dan Mendelson, analyst

The insurance industry says the bonuses will turn what would
have averaged out as a net cut for Medicare Advantage plans in 2012
into a slight increase.

The administration says the reason for the bonuses is quality
improvement, not politics, and the program will be evaluated as it
goes along.

"We are looking at whether an alternative payment incentive
structure would lead to broader quality improvements across all
Medicare Advantage plans, by giving incentives for a broader range
of plans to improve," said Medicare spokesman Brian Cook.

Medicare covers seniors and disabled people. About one-fourth of
beneficiaries are signed up in Medicare Advantage plans that offer
lower out-of-pocket costs and more comprehensive benefits than the
traditional program. Some of the heaviest enrollment is in
politically contested states, including Florida, Pennsylvania,
Ohio, Nevada, Minnesota and Colorado.

The health care law cut $145 billion over 10 years from Medicare
Advantage, partly to correct a widely acknowledged problem with
overpayments to the plans. Those cuts start off modestly in 2012
and build up. Insurers were expected to shift the burden to
beneficiaries in the form of fewer services and higher
out-of-pocket costs, triggering an exodus back to traditional
Medicare.

"The net result is that the boat didn't get rocked," said
independent analyst Dan Mendelson, president of the information
firm Avalere Health. "It's fair to say that (Medicare) could not
tolerate dislocation, given the political climate."

But Mendelson also said he agrees with the administration that
the new money will get more plans thinking about how to improve
quality, if they want to remain profitable.

"They are giving the plans training wheels to improve their quality," he said.

The health care law itself tried to soften the impact of
Medicare Advantage cuts by providing quality bonuses for
highly-rated plans that received four or five stars in a government
grading system.

Then, in a policy shift quietly completed this month, HHS
decided to grade on the curve. Average-quality plans garnering just
three or three-and-a-half stars would also get bonuses, although at
a lower percentage than top-tier plans.

The HHS decision means four out of five Medicare Advantage
enrollees are in plans now eligible for a bonus. Under the tougher
approach Congress took in the health care law, only one in four
would have been in plans getting the extra payments.

HHS' nearly $7-billion bonus program is temporary. In 2015, the
cuts called for in the health care law will kick in again.

Still, the episode could be an early sign that Medicare cuts
used to finance much of Obama's coverage expansion for the
uninsured will turn out to be politically unsustainable, as have
other efforts to impose austerity. For example, Congress has
routinely waived cuts in Medicare payments to doctors.

A nonpartisan agency that advises lawmakers on Medicare
criticized the bonus plan. The Medicare Payment Advisory Commission
said it amounts to "a mechanism to increase payments" and its
design "sends the wrong message about what is important to the
program and how improved quality can best be achieved."

At a time when government is urging health care providers to
improve quality and cut costs, the bonus plan "lessens the
incentive to achieve the highest level of performance," commission
chairman Glenn Hackbarth wrote to HHS officials.

Medicare spokesman
Cook disagreed, saying even plans that get two stars will now have
an incentive to improve.

Medicare has classified the bonuses as a demonstration program,
relying on broad legal authority Congress gave the agency to
experiment with quality improvements. It's the costliest
demonstration program in Medicare history. The money will come from
the Medicare trust fund.